Companies adopt different financial strategies based on their objectives and risk tolerance. Each with its own characteristics and trade-offs.
Balanced growth:
Balanced growth focuses on stable and controlled internal development. It prioritizes steady profitability to ensure sufficient self-financing and to limit debt. This model involves moderate risk-taking and greater financial independence. Shareholders are generally stable, with a capital structure that is either highly concentrated or widely dispersed but sustainable. Additionally, the company has low dependence on its external environment, making it more resilient. A typical example of this model is Danone.
Accelerated growth:
On the other hand, accelerated growth aims for rapid expansion, both internally and externally, often through acquisitions or strategic partnerships. This model accepts irregular profitability and relies heavily on debt to finance its development. It involves high risk-taking and attracts investors seeking quick returns. However, this approach makes the company more dependent on its economic and financial environment.
Maximized Profitability: Focus on Short-Term Gains
In this strategy, a company’s primary objective is to maximize profitability, often at the expense of long-term investments. Growth is not a priority, as the focus is on optimizing financial performance rather than expansion. Companies following this approach tend to operate with a medium debt level, balancing financial leverage with profit generation. Risk-taking is limited, as the emphasis is on extracting high profits rather than making risky investments.
Shareholding in these companies is often unstable, as investors may enter and exit frequently, seeking high short-term returns. The external environment is seen as an opportunity, meaning the company looks for market conditions that favor immediate profitability rather than long-term resilience. A typical example of this approach is businesses engaged in resale after a restructuring process, where companies are optimized for financial gains before being sold.
Minimized Risk: Focus on Long-Term Stability
In contrast, the minimized risk strategy prioritizes sustainability and financial security over short-term profit maximization. Growth is not the main goal, but profitability remains important to ensure the company’s long-term survival. To maintain stability, these companies operate with low debt levels, reducing financial exposure and ensuring greater independence.
Risk is kept to a minimum, and the company aims to provide high dividends to attract and retain stable, long-term investors. Unlike businesses focused on maximized profitability, these firms have low dependence on external factors, making them more resilient in times of economic uncertainty.
The choice between these four strategies depends on the company’s objectives, its risk tolerance, and its ability to mobilize financial resources.